Article Number : 1750 |
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| Date | 2/14/2007 8:41:58 AM |
| Written By | LGM & Associates Technical Flooring Services |
| View this article at: | //floorbiz.com/BizResources/NPViewArticle.asp?ArticleID=1750 |
| Abstract | By Sunil Taneja Vancouver, British Columbia, Canada—Leverage. Archimedes discovered long ago that all it takes is a little leverage to move the world. In this case, a little logistics leverage is allowing Jeff Booth and Rob Banks, founders of BuildDirect... |
| Article | By Sunil Taneja Vancouver, British Columbia, Canada—Leverage. Archimedes discovered long ago that all it takes is a little leverage to move the world. In this case, a little logistics leverage is allowing Jeff Booth and Rob Banks, founders of BuildDirect.com, to move products around the world directly from manufacturers’ to retailers’ doors at a price that is hard to beat. The previous statement might be a little misleading in that BuildDirect does not discriminate against any customer willing to purchase the products it facilitates. It does not matter if the purchaser is a retailer, other wholesaler, builder, independent contractor or end user. The company offers every buyer the same deal on its products with zero haggling. If consumers want to purchase flooring, BuildDirect’s biggest product segment, they can do so for the same price as a retailer, but they still must procure their own installation and materials. The only other caveat is all customers can purchase only in the quantities this online wholesaler offers—pallet size or bigger with no half sizes. It’s like Costco, only supersized. According to Booth, president and CEO, the no-compromise policy is one of the primary reasons the company, which has been valued at $50 million on the venture capital market, is successful to date. Because the wholesaler does sell direct to consumers, some traditional bricks and mortar retailers might be considered competitors. But that does not always hold true considering many of those same retailers may themselves be downstream customers. “The irony is,” he explains, “a lot of our perceived competitors actually buy from us. As an example, a big box store in Oklahoma buys products from one of our customers. Because we’re a new channel, retailers and buyers who understand our benefits actually leverage our scale in order to increase their margins.” BuildDirect creates that scale with a proprietary logistics program that allows the eight-year-old dot.com company to ship anywhere in the world at a better price than many manufacturers could on their own. In addition, Booth says the company has a “very narrow focus” on the products it carries. That focus allows the wholesaler the ability to very often buy most, if not all, of a mill’s entire production line. Average shipping time varies from two to 10 weeks depending on the size of the order and from where the product is coming. He explains, “In a fragmented industry like building supply with millions of manufacturers, there is a multiple approach to market. Now a supplier can outsource its sales, marketing and logistics costs to increase its gross margin with a much higher net margin as well.” Since all of BuildDirect’s customers pay the same price for the product plus shipping, even small retailers can source at prices equal to or better than those negotiated by bigger stores or networks dealing directly with the mills. “There’s no one looking at the market the way we do,” Booth notes. “We’re not an online retailer. Online dealers are focused on small order sizes. We offer a completely different value proposition. “We define our customer by order size rather than customer,” he continues. “We are very steadfast in our approach that way because it allows us to become the most efficient channel. Where somebody can effectively leverage us is in the smaller orders—those under 500 square feet.” As such, even though the company is open to selling to end users, its primary customers tend to be other distributors and retailers—those who buy anywhere from 1,000- to 25,000 square feet on a regular basis. The whole concept of creating an online wholesaler for the builder market came to Booth and his partner, Rob Banks, executive vice president, in 1999, around the same time many people were running from the dot.com sector as its stock market gains vaporized. “We laughed at some of the models out there at the time,” Booth says. “We decided if we couldn’t find something that had real value and would be around for the long term we weren’t interested. Our goal was to build a legacy company that we would be proud to have our kids work in. “It’s amazing how fast it started and took off,” he continues. “When we started up there was probably about $1 billion going into dot.com in the construction space.” In fact, Booth credits the company’s success where so many others failed in part to “a longer-term outlook on what we were trying to accomplish. Our goals weren’t aligned with where the rest of the industry was headed.” Despite his protestations that efficiencies of scale based on volume and quality are the company’s primary focal points, customer service is a key aspect of BuildDirect’s operational approach. If there are problems with a shipment such as damage or missing products, the company works with the purchaser to refund or replace the product quickly. Customers seem to agree with BuildDirect’s approach as evidenced by the review portion of the company’s Web site. Booth says, “We put up all the reviews that come in unedited, [both positive and negative]. We do that to be as transparent as possible. We believe it’s a bold direction to take and shows our customers we have nothing to hide. But as much as the reviews help the customers, they help us in our manufacturer relationships by providing feedback to make products better and better.” The overall packaged approach has worked on multiple levels. In just eight years, the company has grown to where it moved 15,000 truck- and 2,000 container-loads of product in 2006. “That type of buying power on the freight alone makes it cheaper for manufacturers to ship through us than around us,” Booth says. “A number of manufacturers come to us every week asking us to add them into the system. By going through us they can focus on what they do best: manufacturing product.” For more information on BuildDirect, call 877.631.2845. |